Drowned out by louder geopolitical events, the EU-India trade agreement had until this week attracted little attention. But it could emerge as one of the most consequential deals in decades.
As Brussels rushes to line up new trade partners, the latest agreement comes hot on the heels of an EU-Mercosur pact unveiled only weeks earlier. It brings to an end a two-decade standoff and resets economic relations with the world’s most populous country. If ratified, it will grant European goods and services access to 1.45 billion people and the world’s fourth-largest economy.
“The EU and India make history today, deepening the partnership between the world's biggest democracies,” Commission President Ursula von der Leyen told the EU-India summit on Tuesday. “We have sent a signal to the world that rules-based cooperation still delivers great outcomes.”
How did the EU reach a deal with India?
India is widely regarded as one of the world’s most protectionist economies. With a vast domestic market, New Delhi has long been reluctant to open up to foreign goods and services. For the EU, however, gaining entry has been a strategic priority for decades.
Negotiations officially began in 2007, two years after Brussels first set its sights on a trade deal with India.
“The idea has always been that you want to open the Indian market and take part in the Indian growth story,” said Nicolas Köhler-Suzuki, a trade policy advisor at the Jacques Delors Institute.
But talks soon stalled. Brussels pushed for stronger sustainability and labour protections while India hiked tariffs on EU cars to bolster its homegrown automotive industry, sending negotiations into a prolonged deadlock.
Momentum only returned last February, when the entire College of Commissioners flew to India and pledged to clinch a deal by the end of the year — an optimistic timeline many veteran negotiators privately doubted.
The renewed push, though, was less driven by economics than geopolitics. India was hit with 50% US tariffs for refusing to stop buying Russian oil, while the EU was reassessing its own exposure to geopolitical risk.
“The EU has gradually, and more and more, realised the absolute need that it has to diversify its trade relations,” a senior EU official told reporters on Tuesday morning, noting that Brussels has long been trying to de-risk from China and Russia.
Washington’s increasingly coercive behaviour proved decisive. “It’s clear to everyone that the tariff threats that have come from Washington are contributing to that logic as well,” the official said.
What does the trade agreement entail?
Most of the EU-India trade deal is about market access. Under the pact, European exporters will benefit from significantly reduced tariffs on most goods shipped to India, giving EU businesses a substantial competitive edge in one of the world’s most protected markets.
Tariffs on cars, for example, are set to fall gradually from 110% to 10%, while duties on car components will be eliminated altogether within five to ten years. Likewise, tariffs on EU-produced machinery, chemicals, and pharmaceuticals would be substantially lowered.
The deal also lowers tariffs on agricultural products, including wine and spirits. According to the Commission, the scale of the agreement, which reduces tariffs on 96.6% of goods exports to India, could see EU exports double by 2032, saving European businesses around €4 billion in duties. In return, European consumers will gain access to cheaper Indian textiles, gems and pharmaceutical products.
The EU executive has called the agreement the “most ambitious trade opening that India has ever granted to a trade partner.”
Over the past few months, New Delhi has also concluded several free trade agreements with the UK, Oman and New Zealand.
What are the hot-button topics?
The EU-India agreement has so far ducked the kind of backlash seen with the Mercusor deal, which had farmers across the bloc protesting an influx of cheaper agricultural products from Latin America. Most influential constituencies appear broadly supportive, in part because the agreement is expected to have only limited short-term effects on trade flows, which has plateaued in recent years.
Today, India represents the EU’s 9th largest trading partner, accounting for a mere 2.4% of the bloc’s total trade in goods in 2024, trailing well behind the US (17.3%), China (14.6%) and the UK (10.1%).
Instead, the stickiest negotiation point has been the Carbon Border Adjustment Mechanism (CBAM), a carbon levy designed to level the playing field between EU producers and foreign competitors. India has long denounced the CO₂ tax, arguing it constitutes another form of protectionism.
To defuse the issue, EU officials agreed to open a technical dialogue on CBAM, while stressing that the EU would not grant preferential treatment to any trade partner. The dialogue is likely to begin only after the agreement enters into force, the EU official told reporters during a technical briefing.
Who are the EU-India trade agreement winners and losers?
The accord is expected to bring relief to the European industry, which has been battered in recent years by a blend of soaring energy prices and fierce competition from China.
That’s particularly true for the automotive industry — representing roughly 8% of the bloc’s total manufacturing — for which tariffs are set to fall 90%.
While that’s short of the full liberalisation for cars that Brussels initially sought, the EU official said during Tuesday's presser that the outcome would nonetheless be “commercially significant.” Currently, the EU exports only 3,000 cars per year due to punishing tariffs.
Wine exporters also stand out as major winners, with duties dropping from 150% to 75% at the deal’s entry into force and eventually down to 20%. Tariff reduction will also apply to olive oil, processed food, non-alcoholic beverages and a range of meat as well as fruit products, while sensitive agricultural sectors — such as beef, chicken, rice and sugar — will remain fully protected.
Sustainability and human rights provisions, however, are a mixed bag. While Brussels has successfully introduced a chapter on environmental protection, workers’ rights, and women’s empowerment, these clauses lack a dispute-settlement mechanism — meaning that, should India fail to comply, the EU would have no legal tools to enforce them.
What’s next for the EU-India trade pact?
Like any trade agreement, the pact will undergo “legal scrubbing,” including translation into the EU’s 23 official languages. It will then be submitted to the Council for ratification, after which the EU and India can formally sign the deal. For it to enter into force, however, the European Parliament must also back it and the Council must decide on the conclusions.
Despite strong political momentum, the process is unlikely to take less than a year. As such, while this agreement is seen as less contentious than the recent EU-Mercosur deal, there’s still a risk that the Parliament delays ratification over concerns that environmental and social commitments are not enforceable, Köhler-Suzuki said.
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